Tanjung Pandan, Bangka Belitung. The government is confident of meeting its tax target this year on the back of strong collection in the first three months that has so far exceeded that of the same period last year, a senior official said on Sunday (17/04).
Total tax collection, including income tax from the oil and gas sector, but excluding customs and excise, reached Rp 222.3 trillion ($17 billion) at the end of March, up 18 percent from a year ago. The government has collected 17 percent of its Rp 1,307.6 trillion target by March 31, compared with last year's realization of 14 percent.
"This year's tax collection is safe," tax director general Ken Dwijugiasteadi said during a media event in Tanjung Pandan, Bangka Belitung Islands.
Income tax from non-oil and gas sectors, value-added tax, tax on luxury goods, land and building taxes and income tax from the oil and gas sector, also exceeded last year's record.
Tax compliance director Yon Arsal said the government's tax amnesty program last year increased the taxpayer base. The tax office registered more than 36 million individual and corporate taxpayers, or nearly 10 percent more than the year before.
"Looking at the first three months, surely we are looking positively ahead," Yon said.
"We hope last year's [bad results] had bottomed out and the economy has begun to improve, commodity prices to increase, and that the import trend [of capital goods] remains positive," he said.
The government has set an economic growth target of 5.1 percent this year, compared with 5 percent last year.
Yon said the tax office looks forward to seeing the collection data at the end of June, to confirm the improving trend.
An improvement in tax collection creates increased fiscal room for development. Weak government revenue has been a "key constraint" to Indonesia's credit profile, so stronger tax collection will likely improve the country's sovereign credit ratings, Moody's said in a credit outlook report on April 10.
The report said Indonesia's state revenue relative to its gross domestic product in 2016 was the lowest among Baa-rated peers, including Colombia, the Philippines, Kazakhstan and Thailand.
Moody's, in a separate note earlier this year, upgraded its credit outlook for Indonesia to "positive" from "stable" and reaffirmed its Baa3 credit assessment – which is at the lower end of investment-grade bond ratings, just one grade above junk.
The better outlook indicates a possible rating upgrade that will allow the country to attract more foreign investors by selling government bonds at lower rates.
Indonesia is also still in the race to win investment grade from S&P Global Ratings, the only one among the big three rating agencies that has so far maintained a BB+ assessment, one notch below investment grade, on Indonesia's sovereign credit.